Retail spending in 2017 suddenly looks weak

The trend in retail spending suddenly looks much weaker through April—partly as a result of revisions to the government-reported retail data. December holiday results also were revised downward.

Sales excluding autos and fuel are growing roughly between 2.5% and 3.5% in the first months of the year, depending on whether the focus is on seasonally adjusted or unadjusted data. This is as much as a percentage point weaker than previously reported.

If online sales are excluded to focus on brick and mortar store sales, then the sales pace is even weaker at less than 1% year-to-year growth. That is less than half the average in-store growth rate of 2016.
Apparel stores are the biggest drag on in-store sales.

The latest numbers provide the strongest confirmation yet that the post-election surge in consumer spending confidence led by Boomers is failing to produce stronger spending. See more on confidence here.

Here is more on what the latest retail numbers say:

Weaker monthly trend. In April, retail sales grew 3.4% year-to-year on a seasonally-adjusted basis and 2.8% on an unadjusted basis. That is about the same as the revised prior-month growth rate—but down by as much as a full percentage point from the growth rate first reported for prior months.

Weaker holiday. The revisions also provide a much weaker picture of the December holidays. Sales grew 3.0% to 3.5%—on an unadjusted or seasonally adjusted basis—for the November-December period excluding autos, fuel, and restaurants. That’s about half a percentage point weaker than first reported.

Brick & mortar weakness. In-store sales growth is running about 0.8% year-to-date, which is down significantly from about 2.4% growth in 2016.

Apparel weakest of all. The apparel channels—particularly traditional department stores—are suffering the most in store with declines approaching -2.0%. Homegoods channels—especially home improvement—are holding up best. Food-drug-mass channels are weak, but improving with higher food inflation.

Online gains. Online year-to-year sales growth is running an estimated 14% year-to-date, which only slightly below the robust 15% gains of 2017. The estimate is based on the latest quarterly e-commerce sales report from the government for results through the first quarter of 2017.

The latest data suggest that retail sales are lagging the stronger pace forecast for 2017. MacroSavvy™ has forecast a gain of 4.0% in retail sales excluding autos, fuel and restaurants, which would be slightly stronger than 2016.